Wholesale and Retail Trade

 

 

https://sm.asisonline.org/Pages/Redefining-Loss.aspxRedefining LossGP0|#cd529cb2-129a-4422-a2d3-73680b0014d8;L0|#0cd529cb2-129a-4422-a2d3-73680b0014d8|Physical Security;GTSet|#8accba12-4830-47cd-9299-2b34a43444652017-04-01T04:00:00ZAdrian Beck<p>​The world of retail has relied on the word “shrinkage” for more than 100 years to describe the losses companies experience as they go about their business. Shrinkage, however, is almost a euphemistic term describing a simple contraction in the size of the stock held by a company, without offering any real sense of what the cause might be. </p><p>In this way, the term is similar to “shoplifting”—a rather benign term often used by the industry to describe people actively engaging in criminal acts of theft in stores. For comparison’s sake, you rarely see burglars or robbers described as houselifters or purselifters.</p><p>Four buckets of loss tend to be included in survey descriptions of what shrinkage is: external theft, internal theft, administrative or process errors, and vendor fraud. The term “administrative error or process failures” is particularly vague; depending upon the type of retailer and the types of products sold, it can potentially cover an enormous array of types of loss, including damage, spoilage, product going out of date, and incorrect price adjustments. </p><p>A retailer selling food and using a shrink­age definition that includes food spoilage will have a dif­ferent level of loss compared to a retailer selling clothing or auto parts; yet, many shrinkage surveys continue to combine this data together to generate an overall figure for the industry. </p><p>To date, there is no consistent, detailed definition or typology of shrinkage. It is a term that is used throughout the industry, but interpreted in different ways depending on the retail environment and the prevailing organizational culture and practices.</p><p>There is a constant desire to understand what the root causes of shrinkage are: Is it mainly external thieves? Is it the staff employed by retailers helping themselves to the stock? Is it due to organizational inefficiencies? Or is it caused by retail suppliers wrongly delivering on purpose or through error?</p><p>Surveys will often provide numbers that supposedly apportion the total shrinkage losses to each of these types of losses, with external theft frequently—but not exclusively—seen as causing the largest amount. </p><p>The reality is that what these reported shrinkage numbers are actually measuring is what respondents think the causes of shrinkage might be. They are much more a gauge of how the loss prevention industry is feeling than any true measure of the breakdown of losses within the retail industry.</p><p>This is because the vast majority of current shrinkage data collected by retailers is based on periodic audit data collected in stores and sometimes in parts of the distribution network. This data captures the difference between the value of stock retailers think they have and the amount that can be physically counted. The difference between the two is how most companies measure their shrinkage.</p><p>But all this data does is provide a value of how much stock is not there. What it does not do is offer an explanation as to why it has gone missing: Was the stock delivered to the retailer? Did a customer steal it? Was it damaged or stolen in the supply chain? Did an employee steal it? </p><p>The causes could be many and varied, but what is clear is that audit data is rarely good at explaining why discrepancies exist; it simply captures the value of losses where the cause is unknown. Attempts to apportion causes to this data will always involve a high degree of guesswork and personal prejudice.</p><p>Retailing has gone through some profound changes since shrinkage was first used back in the 19th century, not least the introduction of open displays, the growth of branding, greater consumer choice, introduction of credit cards and debit cards, the rise of online shopping, and the widespread use of various types of self-service checkout systems, to name a few. </p><p>Yet, throughout this time of enormous change, the retail industry has continued to use a term that vaguely captures the difference between expected and actual stock values as the core measure of loss in their businesses.</p><p>Given this, it’s time to reconsider how retail companies understand and measure the losses they experience and to develop a more consistent approach to enable future benchmarking activities to offer more meaningful and applicable information.​</p><h4>Total Retail Loss<img src="/ASIS%20SM%20Callout%20Images/0417%20Cover%20Story%20Infographic.jpg" class="ms-rtePosition-1" alt="" style="margin:5px;width:652px;" /></h4><p>Both the Retail Industry Leaders Association’s Asset Protection Leaders Council, based in the United States, and the ECR Community Shrinkage and On-shelf Availability Group, headquartered in Europe, supported a research project led by the author to explore how retailers currently view the problem of loss across their business and develop a new definition and typology that might better capture their impact. </p><p>The research, detailed in the report Beyond Shrinkage: Introducing Total Retail Loss, used several different methodologies: an extensive literature review; a questionnaire to a group of large European retailers; 100 face-to-face interviews with senior directors of 10 of the largest U.S. retailers; and a series of workshops and focus groups with loss prevention representatives from a range of European retailers and manufacturers.</p><p><strong>Loss versus cost. </strong>One of the difficulties of benchmarking any retail business using shrinkage is understanding what categories of retail loss are included or excluded. </p><p>Some companies taking part in this research adopted strict criteria: shrinkage is only the value of their unknown losses based upon the difference be­tween expected and actual values; anything else is regarded as known and, therefore, not included in the calculation.</p><p>Other companies were much more inclusive, incorporating other types of loss ranging from damages, wastage, spoilage, and price markdowns to the costs of burglaries and robberies.</p><p>Part of this definitional variance seemed to be based on how respondents interpreted the difference between what could be considered a “loss” compared with a “cost,” the latter being viewed as an everyday planned and necessary expenditure for the business to achieve its profit goals. Respondents varied considerably in how they interpreted the difference, although many made a key distinction between the value of the outcome and how this differentiated costs from losses.</p><p>“Costs—they bring value to the business; they are incurred because there is a perceived positive purpose in having them. They are part of the revenue generation process and without them, profits would be negatively impacted,” one respondent said. “Losses are things which, if they didn’t happen, there would be no negative impact upon profitability. They do not offer any real value to the business and simply act as a drain on profitability.”</p><p>It was also instructive to hear how some respondents adopted a process of normalizing what some considered to be losses into costs. One respondent explained that “we plan a lot of those costs [possible types of losses], so when we’re looking at it from a planning perspective, we have that built in—anything that we can account for and process and know what it is, we take more so as a cost rather than a loss when we’re defining it.”</p><p>Another respondent talked about how the planning and budgeting process enabled many losses to be redefined as costs. “If it goes above budget, then it becomes a loss; otherwise it is a cost,” the individual explained, while another respondent was blunter: “We try and convert as much of [losses] to costs; it’s then not on my agenda anymore. I deal with shrink.”</p><p><strong>Definition. </strong>From the interviews with senior U.S. retail executives and feedback from the roundtables held in Europe, definitions of costs and losses were eventually developed.</p><p>Costs were defined as “expenditure on activities and investments that are considered to make some form of recognizable contribution to generating current or future retail income.”</p><p>Losses were defined as “events and outcomes that negatively impact retail profitability and make no positive, identifiable and intrinsic contribution to generating income.” Using these definitions, various types of events and activities could then begin to be categorized accordingly. </p><p>For example, incidents of customer theft can be considered a loss—the event and outcome play no intrinsic role in generating retail profits—because it makes no identifiable contribution and were it not to happen, the business would only benefit.</p><p>Alternatively, incidents of customer compensation, such as providing a disgruntled shopper with a discounted price, can be seen as a cost. In this case, the business is incurring the cost because it believes compensating the aggrieved consumer makes the individual more likely to shop with the business in the future. The policy of compensating is an investment in future profit generation and is categorized as a cost—not a loss.</p><p>Another example of a loss is workers’ compensation, where a retailer will cover the legal, medical, and other costs associated with an accident at work, such as falling off a ladder. There is no intrinsic value to the business if an employee is injured at work; if it had not happened, the business would only benefit by not having to pay for the consequences of the event. Therefore, workers’ compensation is a loss.</p><p>While some respondents to this research argued that workers’ compensation is a predictable problem that can be—and is—budgeted for, it still remains an event that the retailer would prefer not happen because it negatively impacts overall profitability.</p><p>In contrast, expenditure on loss prevention activities and approaches, such as employing security officers or installing tagging systems, can be seen as a cost. The retailer has committed to this expenditure because it feels there will be some form of payback from the investment: lower levels of loss, which in turn will boost profits. Whether this payback is measured or achieved is open to debate.</p><p>What these examples focus on is not whether an activity or event can be controlled or whether the incurred cost was planned, but its fundamental role in generating current or future retail income. If a clearly identifiable link can be made between an activity and the generation of retail income, then it should be regarded as a cost; all those activities and events where no link can be found should be viewed as a loss.</p><p><strong>Categorizing losses</strong>. In developing the categories of the Total Retail Loss Typology, it was important to draw a distinction between the types of loss that can be measured in a way that is manageable for modern retail business, and those that cannot. </p><p>Additionally, it was important to consider the value of collecting data on a given loss indicator. Is it meaningful for the business to monitor a category of loss? Will its analysis offer potentially actionable outcomes that may help the business meet its objectives?</p><p>There is little point in developing a typology made up of a series of categories that are either impossible or implausibly difficult to measure or once measured offer little benefit to the business undertaking the exercise.</p><p>For example, most retailers would be keen to understand how often items are not scanned at a checkout. While it is theoretically possible to measure this, the reality for most retailers is that the ongoing cost would probably be prohibitive. </p><p>Determining whether proposed loss categories met the three M’s test (manageable, measurable, and meaningful) was an important part of creating a typology likely to achieve any form of adoption across a broad range of retail formats.</p><p><strong>Typology.</strong> The research identified 31 types of known loss that are included in the Total Retail Loss Typology covering a wide range of losses across the retail enterprise and incorporating events and outcomes beyond just the loss of merchandise. The typology is broken down into four locations of loss: store, retail supply chain, e-commerce, and corporate. Each location then has a variety of subcategories divided between malicious and nonmalicious. </p><p>For example, a malicious corporate retail loss would be fraud; a nonmalicious corporate retail loss would be workers’ compensation, regulatory fines, or bad debt. </p><p>However, the term does not encompass every form of loss that a retailer could conceivably experience. The word “total” is being used in this context to represent a much broader and more detailed interpretation of what can be regarded as a retail loss, rather than necessarily claiming to reflect the entirety of events and activities that could constitute a loss. In the future, the scope and range of the Total Retail Loss Typology will change to accommodate new forms of loss, and this is welcomed.</p><p>The typology is designed to enable the calculation of the value of retail losses, not necessarily the number of events; where an associated value cannot be calculated or there is no loss of value associated with an incident, it should not be included.</p><p>For instance, if shop thieves are apprehended leaving a retail store and the goods they were attempting to steal are successfully recovered and can be sold at full value at a later date, there is no financial loss associated with the incident. The retailer may still want to record that the attempted theft took place and was successfully dealt with, but that it would not be recorded in the Total Retail Loss Typology.​</p><h4>Potential </h4><p>The proposed Total Retail Loss Typology is a radical departure from how most retail companies have understood and defined the problem of loss within their companies, moving away from a definition focused primarily on unknown stock loss to one that encompasses a broader range of risks across a wider spectrum of locations.</p><p>While there is a simple elegance about the approach adopted in the past, based upon the four traditional buckets of shrinkage, it is increasingly recognized that these broad brush and ambiguously defined categories are no longer capable of accurately capturing the increasingly complex risk picture now found in modern retailing. Instead, the Total Retail Loss Typology has the potential to benefit retail organizations by managing complexity, encouraging transparency, creating opportunities, and maximizing loss prevention.</p><p><strong>Managing complexity. </strong>The retail landscape in which shrinkage was first described has been transformed by innovation and change. Simply relying upon the traditional four buckets of estimated losses to fully reflect and properly convey the scale, nature, and impact of retail losses is no longer appropriate, particularly as the retail environment becomes more dynamic and fast changing.</p><p><strong>Encouraging transp</strong><strong>arency.</strong> The ambiguous nature of most shrinkage calculations and the difficulty of understanding its root causes generate a lack of accountability, particularly within retail stores.</p><p>Store managers question the reliability of the number, especially where there is a pervasive sense that the supply chain may be foisting losses upon stores that are actually caused by inefficiencies. Unknown store losses can conveniently be blamed upon short shipments or roaming bands of organized thieves, rather than being apportioned to actual events taking place in the store.</p><p>Losses can also be moved between different categories, depending upon the performance measures in place—wastage can quickly become shrinkage if the former is identified as a key performance indicator. </p><p>By measuring a broader range of categories of loss, it becomes much more difficult to play this game; most losses will be measured somewhere, improving transparency and accountability throughout the organization.</p><p><strong>Creating opportunities.</strong> A recurring theme from the research was the lack of prioritization and urgency associated with categories of loss that had already been measured or for which a budget had been allocated.</p><p>Many respondents were quick to view these factors as a cost; therefore, not requiring any remedial action by the business. In effect, the process of capturing the loss or planning for it through budget allocation rendered them immune from concern over the actual loss.</p><p>By adopting a systematic approach and agreeing on the definition of a retail loss and bringing these together under a single typology, opportunities may arise to minimize the overall impact of loss upon the business.</p><p><strong>Maximizing loss prevention.</strong> Dealing with an unknown loss, which is what most loss prevention practitioners typically focus on, is probably one of the hardest challenges faced by a management team in retail. This requires the team to develop a high level of analytical and problem solving capacity.</p><p>Trying to solve problems where the cause is typically unknown is also at the hard end of the management spectrum. It requires creative thinking, imaginative use of data, and considerable experience. Imagine if these capabilities were used on the broader range of known problems encapsulated in the Total Retail Loss Typology. The impact could be profound.</p><p><strong>Using resources. </strong>By generating a broader, more detailed understanding of how losses are impacting a retail organization, it may be possible to take a more strategic approach to the allocation and use of existing resources.</p><p>The Total Retail Loss Typology could offer value in how businesses not only respond to existing loss-related challenges, but also use it to review the implication of any future business decisions. </p><p>The interplay between sales and losses needs to be viewed in the round and not as a series of cross-functional trade-offs where losses and profits are allocated separately, driving behaviors that are unlikely to benefit the business.</p><p>It’s within this context that the Total Retail Loss Typology has been developed—to enable retail organizations to better understand the nature, scale, and extent of losses across the entire business, and to use this information to make more informed choices about how to grow profits and improve customer satisfaction.</p><p>As the pace of change in retail con­tinues to intensify, it’s time for the loss prevention industry to begin to move away from a notion of loss developed in the 19th century to one that better reflects and recognizes the complexities and challenges found in the 21st century.  </p><p><em><strong>Adrian Beck </strong>is a professor of criminology in the Department of Criminology at the University of Leicester in Leicester, United Kingdom. Beck undertook the study Beyond Shrinkage: Introducing Total Retail Loss commissioned by the Retail Industry Leaders Association’s Asset Protection Leaders Council and is an academic advisor to the ECR Community Shrinkage and On-Shelf Availability Group. ​ ​</em></p>

Wholesale and Retail Trade

 

 

https://sm.asisonline.org/Pages/Redefining-Loss.aspx2017-04-01T04:00:00ZRedefining Loss
https://sm.asisonline.org/Pages/Surveillance-and-Stereotypes.aspx2017-04-01T04:00:00ZSurveillance and Stereotypes
https://sm.asisonline.org/Pages/Crime-of-Opportunity.aspx2016-12-01T05:00:00ZCrime of Opportunity
https://sm.asisonline.org/Pages/Book-Review---Supply-Chain-Risk.aspx2016-10-01T04:00:00ZBook Review: Supply Chain Risk
https://sm.asisonline.org/Pages/Six-Food-Defense-Changes.aspx2016-06-01T04:00:00ZSix Food Defense Changes
https://sm.asisonline.org/Pages/Safety-at-Sea.aspx2015-07-20T04:00:00ZSafety at Sea
https://sm.asisonline.org/Pages/Surveillance-for-Security-and-Beyond.aspx2015-06-15T04:00:00ZSurveillance for Security and Beyond
https://sm.asisonline.org/Pages/Strategic-Shrink-Reduction.aspx2015-02-01T05:00:00ZStrategic Shrink Reduction
https://sm.asisonline.org/Pages/Chain-Reaction.aspx2015-01-01T05:00:00ZChain Reaction
https://sm.asisonline.org/Pages/Retail-Theft-Inc.aspx2014-10-01T04:00:00ZRetail Theft, Inc.
https://sm.asisonline.org/Pages/the-intelligence-triangle.aspx2014-09-01T04:00:00ZThe Intelligence Triangle
https://sm.asisonline.org/Pages/target-breach-offers-protection-lessons-0013247.aspx2014-04-01T04:00:00ZTarget Breach Offers Protection Lessons
https://sm.asisonline.org/Pages/fighting-counterfeiters-during-holiday-season-0013014.aspx2013-12-20T05:00:00ZFighting Counterfeiters During the Holiday Season
https://sm.asisonline.org/Pages/Shutting-Down-Retail-Theft.aspx2013-11-01T04:00:00ZShutting Down Retail Theft
https://sm.asisonline.org/Pages/loss-prevention-0012628.aspx2013-08-01T04:00:00ZGlobal Retail Crime and Loss Prevention Trends
https://sm.asisonline.org/Pages/asis-2012-seminar-showcase-0011133.aspx2012-12-03T05:00:00ZASIS 2012 Seminar Showcase
https://sm.asisonline.org/Pages/A-Wrinkle-in-Time.aspx2012-08-01T04:00:00ZA Wrinkle in Time
https://sm.asisonline.org/Pages/supply-chain-security-009867.aspx2012-06-01T04:00:00ZSupply Chain Security
https://sm.asisonline.org/Pages/Teaming-Up-on-Loss-Prevention.aspx2012-04-01T04:00:00ZTeaming Up on Loss Prevention
https://sm.asisonline.org/migration/Pages/planning-disaster-009598.aspx2012-03-01T05:00:00ZPlanning for Disaster

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https://sm.asisonline.org/Pages/Maturity--Model-101.aspxMaturity Model 101<div><p>​</p><p><img src="/ASIS%20SM%20Documents/1216%20Sidebar%20Graphic%202a.jpg" class="ms-rtePosition-2" alt="" style="margin:5px;width:356px;" /><br></p><p>Maturity models are a tool used a range of business sectors, including​ manufacturing, software engineering, operations, and logistics. The model is often used to help set process improvement objectives and priorities, and it can provide a method for appraising the state of an organization’s current practices. </p></div><p>Researchers at Carnegie Mellon University (CMU) have been developing early maturity model prototypes since the 1980s. In 2002, CMU released the first version of the Capability Maturity Model Integration (CMMI) tool, which was developed by a group of experts from industry, govern­ment, and CMU’s Software Engineering Institute. Updated versions of the tool were released in 2006 and 2010. </p><p>The Ernst & Young (EY) physical security maturity model developed with Caterpillar is based on this CMMI tool, and also on EY’s cybersecurity maturity model.</p><p>This tool uses a level 1 through 5 rating scale to define maturity levels: (1) Initial, (2) Repeatable, (3) Defined, (4) Managed, and (5) Optimized. For a hypothetical example, take the compliance component of a security department. In the Initial stage of a maturity model, processes are unpredictable, poorly controlled, and reactive. Thus, in that initial stage, the security department is conducting its compliance activities in a haphazard way—putting out fires when they flare, with no real established process for doing so. ​</p><p>When compliance reaches level 3, Defined, the compliance process is established and proactive—perhaps with guidelines enforced by a compliance officer. At level 5, Optimized, the process is so well-established, managed, and defined, that the focus is now on process improvements.  </p><p>​​</p>GP0|#28ae3eb9-d865-484b-ac9f-3dfacb4ce997;L0|#028ae3eb9-d865-484b-ac9f-3dfacb4ce997|Strategic Security;GTSet|#8accba12-4830-47cd-9299-2b34a4344465
https://sm.asisonline.org/Pages/Teaming-Up-on-Loss-Prevention.aspxTeaming Up on Loss Prevention<p>​</p><p>THE GREAT RECESSION HAS HIT MERCHANTS HARD. The U.S. Department of Labor estimates that more than a million retail positions have been lost and a significant portion of those jobs are not expected to return. With retailers suffering staff reductions at both stores and corporate headquarters, one of the biggest challenges for retail loss prevention (LP) departments is halting operational breakdowns that lead to loss. One way of doing so is through the creation and deployment of special in-store loss prevention/asset protection teams.</p><p>In an ideal retail environment, after inventory is acquired for sale and displayed, it is all sold and none of it is returned. That, of course, is not the reality. Out of any given inventory, some items are returned, others lost, damaged, or stolen. That’s known as “shrink,” and it is on the rise. According to the Global Retail Theft Barometer, an annual study underwritten by an independent grant from Checkpoint Systems, the global shrink rate increased by 6.6 percent when comparing 2010 to 2011.</p><p>One factor in the increasing percentage of shrink is the loss of experienced personnel who are knowledgeable about operations and procedures that can prevent problems that result in shrinkage. These workers are the front lines of a loss prevention/asset protection program. At the store level, for example, operational breakdowns from lack of experienced personnel take place across the spectrum of operations, leading to receiving errors, incorrect pricing of new goods or of merchandise slated for markdown, improper storage that results in damage to goods, unrotated perishable or expired items, and cash-handling laxities.</p><p>At the corporate level, similar personnel losses can lead to an absence of LP programs or the implementation of poorly designed and inadequate programs. The results can be catastrophic, causing wasted labor as well as unrecoverable losses that can spell the end of a business altogether.</p><p>The latter is not a baseless doomsday warning: in my capacity as the president and CEO of a retail LP consultancy, after having served for many years in retail LP with major multinational companies, I have seen retailers suffer these consequences, including two companies with more than 845 locations in 48 U.S. states.</p><p>Team LP<br>Companies may not be able to avoid personnel cutbacks or turnover, but they can mitigate the damage to the loss prevention program. One tested way to prevent the breakdown of LP processes after the loss of key personnel is to set up teams dedicated and trained to focus on LP and safety to help ensure that the locations are doing everything they can to limit loss from shrink and risk management exposures.</p><p>Like any good retail strategy, the LP team must have executive buy-in if it is to succeed. Unless this upper-level support is clearly communicated, and time budgeted, store managers will remain unconvinced that they should devote time and other resources to the team’s activities.</p><p>If the company’s head of LP is trying to sell such a program, part of getting corporate approval will be to provide return-on-investment data to company executives as well as the expected outcomes. In my experience, companies that institute these LP teams see a minimum of 10 to 20 percent reduction in shrink and accident costs per store. The cost of the team can be calculated by combining the time dedicated by each hourly associate and any ancillary costs. These ancillary costs can include items such as the cost of purchasing or developing training tools or of purchasing appreciation gifts to be used in a rewards program.</p><p>Set parameters. 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When members leave the team, a certificate of appreciation for their service or some other gift should mark the occasion. In this way, participation will be taken seriously by the team members and others, and good work will result.</p><p>Additionally, the LP team leader position has been used by several retailers as a management training step. Once an associate has proven his or her leadership capability as head of the team, the company places that person in the regular management training program.</p><p>Time management. The team should meet on a schedule set by the company—either weekly, biweekly, or monthly. When I develop these teams for clients, the team is directed to meet each week for one hour to set objectives and tasks, with one meeting per month dedicated to executing a loss prevention and risk management store audit, looking for issues such as high-end products that are left unsecured or an inoperable emergency door alarm, for instance. Another meeting structure might be a 10-minute meeting followed by 30-minute walk of the store to audit LP and safety issues, then a 15-minute resolution planning session, and a five-minute wrap-up.</p><p>The team sponsor needs to put limits on the time allocated to the LP teamwork—especially when a team is successful; otherwise, dedicated employees may overdo project work and shortchange their regular duties.</p><p>The team sponsor should also make sure that important boundaries are not crossed. For instance, at one store, an aggressive team leader embarrassed the other department managers with the LP team’s audit findings. This negatively affected store morale and caused the team leader to be replaced.</p><p>The team is empowered to identify operational breakdowns and to communicate them to local managers, but it should be done cordially and dispassionately. The team is not there to condemn peers or attempt performance coaching. 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At one store, for example, during an audit, the team found that a three-videogame multipack was being sold at the price of an individual game because of improper bar coding by the vendor. The team quickly alerted the company, which issued a recall of the product. In this case, the vendor was required to replace the bar codes on all existing stock and reimburse the retailer its lost revenue.</p><p>Senior management also needs to give the team feedback on what the team sends up the line. This should include acknowledgment of communications, information on when and how specific issues will be addressed, along with proper closure, and periodic commendations of the team for its good work. For example, the team’s success can be included in corporate newsletters and e-mails, or celebrated by regional management.</p><p>During my tenure as a field loss prevention supervisor for Walmart, we ran a district program recognizing the most effective in-store LP/safety team. The program caught the attention of founder Sam Walton, who implemented it companywide, leading to some of the lowest shrink levels the retailer had ever experienced.</p><p>The team should also be allowed to communicate within the store during store meetings, via internal e-mail, or in other ways that information is passed to associates. The team leader should review all communications to make sure they are targeted and clear.</p><p>My experience in the retail field and with clients over many years has proven that in-store LP teams, when properly deployed, are a powerful tool. During both good retail times and bad, effectively trained, managed, and supported teams bolster existing loss and risk prevention business processes, which in turn boosts the bottom line.</p><p>Keith Aubele, CPP, is president and CEO of Retail Loss Prevention Group, Inc., of Bentonville, Arkansas. He has previously been corporate vice president of loss prevention for Home Depot and divisional director of loss prevention for Walmart. He currently serves as the vice chair of the ASIS International Retail Loss Prevention Council.<br></p>GP0|#3795b40d-c591-4b06-959c-9e277b38585e;L0|#03795b40d-c591-4b06-959c-9e277b38585e|Security by Industry;GTSet|#8accba12-4830-47cd-9299-2b34a4344465
https://sm.asisonline.org/Pages/Checking-Out-Security-Solutions.aspxChecking Out Security Solutions<p>​</p><p>SEASONED RETAIL LOSS PREVENTION VETERANS CAN recall the days of checking credit card slips, examining cash-deposit line items, conducting spot audits, and physically counting marked-down items to stay on top of shrinkage and loss challenges. Today, loss prevention specialists rely on increasingly sophisticated technology, especially in the area of point of sale (POS). Among the technologies bringing benefits are cloud computing, video analytics, radio frequency identification (RFID), automated cash management systems, and access control via smart keys.</p><p>Point of Sale<br>Several technologies are helping retailers catch problems at the checkout counter. Chief among these are the cloud and video analytics. To take advantage of new technology, almost all large retailers tie their POS systems to a surveillance camera system. Cameras play a critical role when deployed to monitor cash transactions at the point of sale. When tied to POS data, this video technology becomes even more powerful.</p><p>There are two ways in which this video can be helpful. First, the footage is married to the register’s own data records. In comparing the two, it is possible to catch discrepancies that may indicate accidental loss or intentional theft.</p><p>For example, the video would reveal instances when items on the bottom shelf of a shopper’s cart passed through a checkout lane without being rung up. That could be an honest oversight or theft. The video might also reveal possible “sweethearting”—when a cashier gives items to customers for free by pretending to scan bar codes or by using other tricks.</p><p>An investigation can determine whether the cashier legitimately tried to scan the item but didn’t notice that either a technical error occurred or the scan was incorrectly performed. If the case involves an honest mistake, not malfeasance, the cashier can be given additional training.</p><p>At some retailers, the loss prevention team is small and doesn’t have time to review suspicious transactions. A solution in this case is to outsource the review task, but the solution itself can create security exposures because to do the task, third-party providers must have access to the retailer’s proprietary customer data and to its network.</p><p>Another problem with the concept of having a system that captures all POS transactions and marries video to data is the demand this places on IT infrastructure. Most retailers do not have the capital to invest in building an adequate IT infrastructure. The advent of the cloud, however, offers another option. The cloud makes computing capacity a service to be rented, rather than a product that has to be purchased at a high up-front cost.</p><p>The cloud also means that retailers can now store their POS and camera system data with an off-site host that is completely removed from the company’s private IT network. The retailer only transmits to the cloud the information that it wants to divulge.</p><p>It can also be useful to combine POS video footage with analytics. For example, ScanItALL by StopLift Checkout Vision Systems of Cambridge, Massachusetts, runs video of the cashiers’ and customers’ body motions through an analytic process. Mathematically analyzing the pixels of digitized video, the system studies how a cashier handles each item to determine whether it was properly scanned. It can interpret fraudulent behaviors, such as when a cashier covers up a bar code, for example.</p><p>Some POS systems can also be set to look for items that are left in the cart as they proceed through the checkout line. This can be especially important in self-checkout lanes.</p><p>LaneHawk by Evolution Robotics Retail, Inc., of Pasadena, California, uses cameras tied to the POS system to spot items in the bottom of the basket. The system also links the products it sees at the bottom of the cart to its database, which sends the UPC bar code of the item to the cash register, adding it to the transaction. LaneHawk is currently in use at more than 1,000 individual grocery stores in the United States. Evolution Robotics also has another version of the product for similarly identifying items left in the main section of the cart.</p><p>Carttronics of San Diego offers special modified shopping carts that cannot be removed from the retailer’s property and are automatically disabled if they have not traveled through the checkouts, putting a stop to full-cart walk-outs and bottom-of-the-basket theft attempts.</p><p>Alarms<br>Another area where cloud computing is emerging as a benefit to retailers is in the real-time monitoring of video and alarm systems. In this case, alarm data is transmitted through the cloud to the vendor that responds to the alarms.</p><p>In this area, the change over to the cloud may be inevitable. Every day, voice over IP gains ground, and as the company AlarmCLOUD notes on its Web site, “The clock is ticking on landlines. The security industry has accepted that telcos will be pulling the plug on public switched telephone networks.” Alarm monitoring companies are faced with having to run IP receivers in house to accept IP signaling and are themselves turning to cloud services. For a monthly fee, companies such as AlarmCLOUD offer to save the alarm company the cost of equipment, labor, upgrades, and servicing.</p><p>Store Shelves <br>Some theft occurs in the aisles and can’t be caught at the POS. There are systems to address this threat also.</p><p>For example, Evolution Robotics has a product called ShelfHawk that is meant to combat the growing organized crime tactic of shelf sweeping in which whole shelves of items highly valued for resale, such as diabetic test strips, are stolen in bulk by being swept into a booster bag (a bag commonly used by retail thieves), leaving the shelf bare.</p><p>The ShelfHawk system uses strategically placed cameras to watch selected shelves and to report on suspicious activities such as dwell time—the length of time a person spends in front of shelved items. A longer dwell time indicates that the customer may be waiting for a chance to steal what is there. When the cameras pick up someone spending too long in a particular area, the analytics recognize this and sound an alert so that staff can check on the situation.</p><p>The system has the added benefit to the retailer of recognizing when a shelf needs to be restocked, sending an alert when, for example, the last box of teeth whitening strips in a row is removed, leaving only an empty space.</p><p>To deal with theft of individual items, there are also tags. Traditionally, retailers worldwide made a large investment in tags that used electronic article surveillance (EAS) technology, the components of which include the hard tags seen clipped to merchandise, the detector/pedestals placed at shop egress points, and the deactivators and detachers used at the checkout counters.</p><p>While EAS systems have proven their worth in stopping thefts, or at least alerting staff that a theft is occurring, they cannot tell retailers what has been taken. For example, an EAS system will set off an alarm indicating that something is being stolen. By contrast, an RFID tag can tell the retailer that a black silk woman’s blouse selling at $125.99 was the item that slipped out the door. This ability to know which item was taken reclassifies losses from “shrink,” which is defined as unknown loss, to known losses that can help retailers pinpoint the items that are vulnerable and need additional protection within a store.</p><p>The system can also help identify vulnerabilities by department or store location. For example, if reports generated by the system’s database indicate that a number of watches have been stolen in store locations in a particular geographic area, these items can be moved to a locked case. In other regions where there has been no watch theft, the increased protection may not be needed.</p><p>The components of most RFID inventory control systems are the tags, the readers, and the software that usually runs on a standard PC, which is Windows based. Because RFID tags are contactless, their information can be captured by readers that are placed to cover an entire environment, unlike bar-code inventory management systems, in which a scanning beam must pass over the tag. They are also less susceptible to damage or wear that can destroy bar codes.</p><p>One example of RFID loss prevention systems newly introduced to retailers is the OPI Loss Prevention System by Optical Phusion, Inc. (OPI). The system combines wireless communications capabilities with passive RFID technology and software. Hand-held scanning terminals can be configured to scan retail products and return a product description and current retail price, making it simple and fast for a manager to walk through a store and create a complete inventory of items.</p><p>To catch shoplifters, each RFID chip returns a unique identifier when it passes through the zone covered by the RFID readers and antennas that are placed in the front doors of each store. When the RFID reader detects a tagged item, it passes the information to the OPI Loss Prevention Controller software, which then transmits a command to alarm. Jamison, another RFID development company based in Hagerstown, Maryland, has developed a converged RFID/EAS technology that is able to bring the technologies together for the retail platform.</p><p>Not far away are the days when this same technology will allow customers to merely push a shopping cart past a reader and swipe a debit or credit card to make payment without waiting for each item to be scanned. Inventories will be automatically updated and any items secreted on individuals buying other items will be read automatically and added to the bill.</p><p>Entrance<br>Technology is also making it possible for stores to have some advance warning when trouble walks in the front door. For example, a facial recognition software system from T-Mobile scans the faces of incoming customers to see if any match a database of known previous shoplifters, bad-check writers, wanted criminals, and members of organized retail crime flash mobs.</p><p>Accounting<br>The back office is another area where technology is being put to good use by security. For example, retailers are beginning to take full advantage of cash recycling systems that not only reduce staff time for certain tasks in the accounting office but also increase cashier accountability. These systems typically reduce the cash on hand in a retail store, create instant deposits, and can be tied to banks and armored car services for immediate provisional cash credit. The systems also limit cash access by employees, creating a deterrent to theft and armed robbery.</p><p>One cash managing system, The Revolution by Tidel of Carrollton, Texas, is now being used by a number of retailers including Whole Foods, Hy-Vee, and United Groceries. (Security Management looked at this system in depth in its February 2010 “Case Study” column.) The Tidel product employs a unit about the size of a large photocopier that combines a drop vault, touchscreen user interface, cash and coin counters and dispensers, and a biometric palm scanner.</p><p>When cashiers arrive, they don’t need to collect their day’s tills from supervisors who received them from bookkeepers who prepared them in the predawn hours. A cashier goes to the machine and places his or her palm on the reader. Once the unit recognizes the cashier, he or she picks up an empty till with an attached bar code, and the machine scans it, linking the till to the cashier for that shift. The till is then inserted into a slot and the unit automatically dispenses the correct amount of bills and coins. The cashier removes the till and scans the bar code off a canvas bag in which he or she will place all of the checks, coupons, rain checks, and any other “media” that are collected in the course of the day. The process takes less than a minute to complete.</p><p>Access Control<br>Access control solutions for retail have recently seen the coming of intelligent key systems. Resembling key fobs with a metal cylinder at the head, these keys are programmable in a way similar to standard access control cards, allowing the system administrator to set parameters such as times the key is active and store doors or display cases on which it can be used, all based on an employee’s duties. For example, the smart key may let a store clerk assigned to the jewelry department open the display cases there but not let that employee open a case in electronics.</p><p>Developed by Medeco of Salem Virginia, a division of ASSA ABLOY, the system also collects data on use and use attempts, so if an employee tries to use his or her key to gain access to a proscribed area, that attempt will be recorded and flagged when the data is downloaded from the key at the end of the employee’s shift. Data from the keys can also help managers pinpoint areas where employee training may have been lax. It can, for instance, note when a display case was incorrectly relocked.</p><p>Some retailers are also employing smart key systems on their truck fleet to prevent dishonest truckers from picking the locks on trucks, removing goods, and reselling them.</p><p>Enterprise Management<br>Some providers are offering Web-based analytic management tools. Such systems help companies make the most of their physical security data. The platform may be built to integrate and manage security, safety, and operational systems such as surveillance, access control, alarms, and exception reporting.</p><p>These solutions pull from several applications—video, access control systems, and internal assessment processes—for better decision-making. One example is the Encapsulon Control platform by Wren Solutions of Jefferson City, Missouri.</p><p>Today’s retailers exist in an era with fiscal constraints and persistent criminal threats. The challenges are great, but targeted use of technology can help retailers manage risk and preserve profits.</p><p>Keith Aubele, CPP, is president and CEO of Retail Loss Prevention Group, Inc., of Bentonville, Arkansas. He was previously the corporate vice president of loss prevention for Home Depot and divisional director of loss prevention for Wal-Mart. He serves as the vice chair of the ASIS International Loss Prevention Council.<br></p>GP0|#3795b40d-c591-4b06-959c-9e277b38585e;L0|#03795b40d-c591-4b06-959c-9e277b38585e|Security by Industry;GTSet|#8accba12-4830-47cd-9299-2b34a4344465